Hamilton Lawn Service earned $1,000 for services rendered.The customer promised to pay at a later time.What is the effect on accounts?
A) Accounts receivable decreases; Owner's capital increases.
B) Cash and Accounts receivable both increase.
C) Cash account increases; Accounts receivable decreases.
D) Accounts receivable increases; Owner's capital increases.

Question

Quizplus · Accepted Answer

When Hamilton Lawn Service earns $1,000 for services rendered and the customer promises to pay at a later time, the accounts receivable increases because the business has a right to receive payment in the future. As a result, owner's equity or capital (which is the difference between assets and liabilities) also increases. No cash is received yet, so cash account is not affected.

Hamilton Lawn Service Earned $1,000 for Services Rendered